In the labor market, an increase in labor productivity the real wage rate and the level of employment.

Question

Quizplus · Accepted Answer

An increase in labor productivity means that each worker is producing more output per unit of time, which makes the labor more valuable to employers. This leads to an increase in the demand for labor, as firms seek to hire more workers to take advantage of the higher productivity. This increase in demand for labor drives up the equilibrium wage rate, leading to a higher real wage rate. Additionally, the increased demand for workers leads to an increase in the level of employment, as more workers are needed to produce the higher levels of output. Therefore, an increase in labor productivity raises both the real wage rate and the level of employment.

In the Labor Market, an Increase in Labor Productivity the Real